Title: Tehran Stock Exchange Navigates Crossroads: Cautious Optimism for a Sustained Recovery
A Tentative Ascent
The Tehran Stock Exchange concluded the latest trading week with a modest upward trend in its indices. Market analysts suggest that while the equity market may undergo a period of price and time-based correction, the underlying potential for a return to a growth trajectory remains. This potential upswing, however, is contingent upon the emergence of positive economic stimuli and a reduction in prevailing economic and political risk factors.
Signs of Stabilization and Underlying Strength
According to Pedram Rotiha, a capital market expert, the market is currently displaying signs of stabilization and even a nascent inclination towards growth. “Trading volume and value indicate that buyers continue to participate robustly in the market, which has largely charted its current course,” he stated. The inflow of capital witnessed in recent weeks has also assisted the market in establishing a relative price floor, leading to calmer trading behavior. This equilibrium suggests the market is poised for its next move, which could be a resumption of its upward trend depending on forthcoming conditions.
A mix of positive and negative factors currently influences market sentiment. On one hand, elements such as interest rates and political risks exert downward pressure and could decelerate any positive momentum. Conversely, factors like the growth in the negotiated and free-market USD rates, and crucially, the supply of foreign currency on the secondary trading floor for numerous companies, play a significant positive role. This dynamic enhances the valuation attractiveness of stocks and bolsters the profitability of export-oriented firms.
The Need for a New Catalyst
While the market has grown to a certain peak recently, it has since experienced a short-term correction. Analysts believe that for the upward movement to continue, a new driver is essential. This catalyst could emerge from news related to the national budget, political developments, or the release of corporate nine-month and annual reports. Inherent risks, such as power outages, governmental restrictions, and unpredictable policy shifts, persist. Despite these, the market’s primary drivers appear stronger and are seen as capable of reactivating the growth path.
Broad-Based Support and a Positive Medium-Term Outlook
A review of market behavior reveals a high correlation among various stocks, with a key observation being the continued active and powerful presence of buyers for large-cap companies. While there was a brief shift towards smaller, more undervalued stocks, which continue to see good demand, major corporations still enjoy strong support from influential buyers, often giving them an edge over sellers.
In summary, the current market correction is not expected to be prolonged. Even if it persists as a time-based correction, the market is anticipated to gradually rediscover its primary trajectory. While the term “rapid growth” may be premature, the market possesses the potential to re-enter an upward channel and potentially surpass previous highs. The market appears to have established its floor, buyers remain active, and fundamental factors support dollar-reliant stocks, collectively contributing to a positive medium-term outlook.
The Broader Economic Context
Another market expert, Mehdi Karimi, provided analysis on interconnected markets, starting with foreign exchange. He noted that the current USD rate resides within a specific range, with the projected year-end equilibrium rate estimated to be higher. A gradual increase in the exchange rate, aligned with inflation, is anticipated, provided two key factors do not exert new pressure: systematic risks and military tensions—which have recently subsided—and the volume of oil exports, which has continued steadily, albeit with foreign currency income below budget forecasts. Overall, the currency market is in a relatively balanced state.
Regarding the money market, Karimi pointed to high interest rates on government debt, which have reached approximately 38% and even exceed 40% for short-term maturities. Given the continued issuance of government bonds and the central bank’s maintained contractionary policies, these high rates are likely to persist. Such elevated interest rates naturally restrain the formation of sharp, accelerated movements across other financial markets, ensuring the money market remains in a contractionary phase.
Future Projections and Key Dependencies
Karimi added that after becoming significantly undervalued in recent months and facing pressures from regional conflicts, the stock market has grown again, returning to its value range. It is now in a corrective phase, but the overall trend remains upward. His expectation is for the overall index to potentially reach levels above four million units by next summer. This projection, however, depends on several critical factors.
The first is interest rates; powerful market movements are unlikely to materialize until rates decrease. The second crucial factor is the upcoming national budget, to be released in the next two to three weeks, which will set the direction for market expectations. Key budgetary issues include the gas feedstock price for petrochemical companies, the speed of transferring corporate foreign currency to the secondary trading floor, and decisions regarding preferential currency. The abolition of preferential currency appears certain; the only ambiguity lies in the new rate that will replace it, which will naturally have a significant impact on industries. Reforms in the energy sector, likely including gasoline, are other factors influencing the market’s future.
Consolidated Economic Outlook
Synthesizing these factors, the general outlook for the economy and capital market is as follows: the USD will likely see growth aligned with inflation, interest rates above 40% will be maintained in the coming months, and the capital market—provided the budget does not deliver disappointing news—can maintain its current range as a price floor. Growth in corporate sales, relatively positive monthly reports, and a slight improvement in economic conditions can lay the groundwork for a better market environment. Therefore, if key economic variables remain on their current path, the capital market could gradually enter a more balanced and subsequently ascending phase.